Archive for the ‘Uncategorized’ Category
Competition law and sport: we need more, not less ‘financial fair play’ in Europe
This time I do not have particularly good excuses for squatting the blog, but I do so nonetheless. This said, thanks to Alfonso and Nicolas!
Basketball fans like myself are probably following the NBA playoffs. Those basketball fans that are also interested in competition law and in statistics (no doubt a substantially smaller fraction) will have realised that the teams reaching the conference finals this year are based in relatively small metropolitan areas. Only Miami is in the US top ten (9th). Indianapolis (29th), San Antonio (31st) and Memphis (45th) are far behind. Just because there is always a good excuse to point out how incredibly good Kevin Durant is, I will also mention that Oklahoma City is right behind Memphis in the ranking. It is safe to say that the fans of any NBA franchise can realistically hope to see their team win the championship one day.
There was a time where a team based in a comparable European city could aspire to win the UEFA Champions League — Nottingham Forest, which won the European Cup two years in a row (1979 and 1980) is the archetypal example in this sense. Not any longer. Or maybe it could, if a tycoon decided to pour billions of euro into the team overnight. Starting probably with Chelsea FC, we are now used to the stories of teams becoming instant winners. Monaco, just promoted to the top division in France, is the latest (and one of the most outrageous) examples. In parallel, the Spanish football championship has become unbearably boring. Only Barcelona and Real Madrid can aspire to win. We have witnessed yet another freak show record-beating championship this year.
And yet, the celebrity sports lawyer, Mr Dupont, complains about the modest attempt by the FIFA to introduce ‘financial fair play regulations’. I thought this is a good occasion to point out why more measures actively promoting competitive balance, not less, would be needed in Europe. It has been said thousands of times, but one cannot emphasise enough the fact that competition among sports teams is fundamentally different from competition among firms in most other markets. Teams are interdependent. Without teams against which to compete, clubs are worth nothing (even the Harlem Globetrotters need the Washington Generals!). This means that one big team’s success is only partly attributable to it. In this sense, I have no doubt that Real Madrid and Barcelona are taking a free ride on competing Spanish teams by capturing around 45% of the income coming from the sale of television rights. It also means (and this will look obvious to the readers, but competition authorities tend to ignore this fact when convenient) that fan interest lies in the championship taken as a whole, not the individual teams.
What are the implications of these features? They look obvious to me. There are very good reasons to set a stringent ‘salary cap’ to preserve the competitive balance among teams. Similarly, transfers of star players from relatively poor to relatively wealthy teams should be severely restricted (just as they are in the US). I prefer a championship in which Tottenham Hotspur (to clarify, West Ham is my London team!) can build a winning team around Gareth Bale instead of seeing this player leaving for Manchester City or Real Madrid as soon as he achieves superstar status. Finally, television rights should be more evenly distributed among teams. I believe we will progressively get there, and I hope that, when the moment comes, the Commission will take account of the objective features of sports competitions (which are measurable differences, not some sort of tailor-made exception) so that European sports become genuinely interesting and the outcomes of competition truly difficult to predict and vary from year to year just as they do in the US.
New Belgian Competition Agency – Open Positions
The much awaited reform of the Belgian competition authority is now out in the open.
New positions are being created (see here for more):
– President;
– Chief Economist;
– General Counsel;
– General Prosecutor;
– 20 part time Assessors, i.e. 10 French speaking + 10 Dutch speaking => the assessors will hear cases within decisional chambers; those chambers will be composed of 2 assessors + the President).
All the info can be found in the Belgian Official Journal of 27 May 2013.
Now, the talk of the town about this recruitment process:
1. A puzzling feature of this call for application is that French will be tested for Dutch speaking applicants to the position of assessor (although they won’t hear cases in French), and vice versa; but no such test will take place for the Chief of Legal Affairs and the Chief Economist, who can be unilingual. Query why.
2. Some people have discretely lamented that (i) as usual in Belgium, the process will be heavily politicized; (ii) that the future organigram of the agency would be already decided; and (iii) that several of strong candidates would in turn be dissuaded to participate to the beauty context.
I have sought information on this. I have been repeatedly told that NOTHING has yet been decided. There is apparently no obvious candidate for any of those jobs => put simply, incumbents will not be favoured over new entrants and anyone interested shall apply.
3. Nothing seems to disqualify lawyers from private practice to apply for a job as part time assessor. Some rules on conflicts of interests, which to date do not exist, will need to be adopted, if the new authority wants to avoid endless procedural problems.
4. Nothing is said of the confidentiality of applications and of the members of the selection committee.
5. The deadline for applications is tight: 10 June. RUN!!!
Lost Parrot
Our friend and former boss Trevor Soames has lost his parrot Bombolini a dozen days ago.
Trevor and Camilla offer a €1,000 prize to anyone who will found him.
I attach below the notice that Trevor and Camilla put together.
You may contact Trevor at +32.491.378.946 or Sergio à Mondocane at +32.2.660.96.56
You can also email Trevor and Camilla at: trevorandcamilla@ymail.com
See here for the notice: Lost Parrot
What went wrong with Article 102 TFEU? A procedural-institutional hypothesis
My writing in the blog is not the only side effect of Alfonso’s long working hours. We should have run the Brussels 20k together (I bet he even forgot about that). Maybe next year!
As I have devoted part of my Sunday to update an article, I thought It could be a good idea to ask your views about one of my forthcoming pieces. The view that there is something wrong with Article 102 TFEU is far from unanimous, but it is certainly widespread. There is not even a consensus as to what exactly is wrong with the said provision. In my view, the problem with existing case law is not in any way economic, as many authors believe, but legal. Cases addressing the same questions (say, price cuts) follow different rationales (just compare AKZO and Compagnie Maritime Belge). The substantive standards of intervention also vary across practices. Sometimes, the mere potential of foreclosure is sufficient to trigger the application of Article 102 TFEU (rebates and exclusive dealing are a classic example). Other practices require concrete evidence of foreclosure (just think of the case law on refusals to deal and that on margin squeezes).
AG Cruz Villalon on the scope of the Regulatory Framework for electronic communications
Publicly exposed as I have been, I have no choice but to be back in my capacity as interim blogger (which I confess is something I pretty much enjoy). It is not even a bad time for Alfonso to be extremely busy. Some readers will remember a post I uploaded a few months ago on a ‘not-so-mainstream’ pending case, which addressed some questions that I follow closely. Right on time, Advocate General Cruz Villalon delivered his opinion on 30 April, which is for the time being only available in French.
The fundamental question raised was that of whether a multichannel bundle offered by a cable operator is an ‘electronic communications service’ within the meaning of the Regulatory Framework for electronic communications. The material scope of the Framework was defined in an awkward way, as ‘services providing, or exercising editorial control over, content transmitted using electronic communications networks and services’ were not covered by it. This would mean that audiovisual media services (TV channels, on demand services and others) are subject to a different set of rules (typically media laws, which follow a different logic).
A careful reading of the Regulatory Framework suggests that multichannel services provided by cable operators do not qualify as ‘electronic communications services’ . In that sense, the question raised by the Dutch Court looked like a non-issue. This seems to stem clearly from Recital 45 of the Universal Service Directive, pursuant to which ‘[s]ervices providing content such as the offer for sale of a package of sound or television broadcasting content are not covered by the common regulatory framework for electronic communications networks and services’. It is also something that derives from Article 31 of the same Directive, which is carefully worded so as to make it clear that ‘must-carry’ obligations do not apply to the said packages but only to the exploitation of the infrastructure. What is more, the Commission and the National Regulatory Authorities seemed to assume that the said services are not caught by the Framework.
In his analysis of the question, Advocate General Cruz Villalon does not refer to the Universal Service Directive. This is surprising, if only because it seems to provide the most straightforward and directly relevant answer to the question. The Opinion does not go beyond the generalities and the definitions found in the Framework Directive. As a result (and this time unsurprisingly), the answer suggested by the Advocate General fails to bring a satisfactory solution to the real problem created by the truncated scope of the Regulatory Framework. He takes the view that multichannel bundles qualify as ‘electronic communications services’ insofar as (my free translation of ‘des lors que’) they comprise the transmission of electronic communications signals. But then does this mean that only the transmission element of the activity is caught by the Framework? Or does it mean that the bundles as a whole are caught by it? I hope the ECJ will be more explicit in this regard.
A la prochaine!
A post on food and competition law dedicated to our friend Alfonso, who is busy prepping for the big hearing in Cisco v. the two best antitrust friends Commission+Microsoft.
One of our readers has informed us that the Bundeskartellamt has conducted dawn raids at firms active in the potato sector (growing and distribution). Although lengthy, the press release does not say much of the substance of the case. Apparently, the BKartA suspects price fixing.
Neither does it mention whether there was a leniency application. Yet, we are told that the BKartA never gives such info at this stage of a case.
Thanks to Andrea for the pointer.
The Bon Jovi Defense
I gave a presentation last week at the Intertic conference organised by F. Etro in Rome (see link hereafter:Recent Developments in Article 102 TFEU – Intertic Conference – Final).
This was a very good event, with many great speakers.
One of the main points in my presentation was to exort the Commission, as a best practice, to avoid working on the new “hi tech” cases under the “likely” effects framework, and prefer to investigate them under an “actual” effects framework.
A Commission official rightly remarked, however, that agencies cannot wait to have dead bodies on the floor to intervene.
So I gave some thinking to the remark. On face value, this is a commendable suggestion.
Yet, when one thinks about it, this is a bit of a rethorical, oversimplistic defense: a company is either dead or alive, full stop (we may call it the “Bon Jovi defense“, after the band’s classic “dead or alive” gem).
Bu this wholly fails to understand that there is – and this is fortunate – something between life and death, and that companies do not exit markets instantly.
On top of this, most players in the hi tech sector are big corporations with deep pockets – they all accuse each other of being dominant – that are unlikely to disappear overnight.
That said, I understand the Commission’s concerns. To help the agency, I would argue in favour of the use of interim measures. After all, those measures may give the Commission the time necessary to amass empirical proof of anticompetitive effects, meanwhile mitigating the harm on alleged victims of the dominant company.
Besides this, it would be probably more satisfactory to think about this issue in terms of threshold, and ascribe a well-defined probabilistic threshold to the concept of “likely” effects, drawing for instance inspiration from the discussion that took place in merger control in the Tetra Laval case (“in all likelihood” v. “balance of probabilities“). Given the escalation of sanctions for infringements of Article 102 TFEU, I’d set the bar quite high.
A last thing: no one can predict the future… and I trust antitrust agencies are no exception to this. So again, the principle of enforcement humility (we mentioned it in a previous post) calls for a modest, empirical approach to fast moving markets, as advocated by J. Wright in a recent excellent speech.
PS: a question for our readers: I am looking for real life evidence of firm exit out of anticompetitive exclusionary conduct. Can anyone help? Examples shall not necessarily come from antitrust cases. I am thinking of running some case studies with my students.
CCP Conference on 6 and 7 June
Our friends from the University of East Anglia Centre for Competition Policy (CCP) have put together an original and attractive conference (see link at the end of this post).
This is not yet another conference on competition enforcement. The programme tackles institutions for competition enforcement, but offers to do this through several lenses: historical, comparative, economics, etc.
Besides this, there’s a significant number of enforcers on the programme, which promises well informed discussions.
A must attend.
Patent Settlements and Rules of Inference
We had this morning at the GCLC a half day conference on pay for delay arrangements in the pharmaceutical sector.
This was a great event, which triggered the following thoughts.
On the law, the problem is not the conduct in itself, i.e. the payment arrangement (also referred to as a “settlement” agreement). Any agreement which consists in paying to seclude a competitor can be unlawful. The FTC apparently talked of a “classic violation” in old documents. We see such agreements all the time in the area of vertical restraints, when firms pay distributors in exchange for exclusivity so as to keep rivals off the market.
The problem lies elsewhere, in the proof of the anticompetitive impact of the agreement, actual or potential (the second component of an infringement). Economists talk about a credible theory of competitive harm.
Now, a settlement payment from originator to generic can only be deemed to restrict competitive entry if the judge would invalidate the patent. In other words, a settlement payment can only be anticompetitive if the patent is invalid. Otherwise (if the patent is valid), competitive entry could just NOT occur, and the payment question is irrelevant.
If I understand correctly, the Commission apparently assumes invalidation. In other words, it assumes that judges would invalidate litigated patents. This stance on what the judge is poised to do is similar to that found in the abuse cases involving Standard Essential Patents, where the Commission seems also to assume that the judge will grant injunctions.
My take on this: this is a meritorious assumption to make if only because patents are deemed presumptively valid once granted. And this weak assumption is not good practice when one has to formulate new policy. As J. Wright, FTC Commissioner, explains beautifully in a recent speech: the formulation of new theories of harm should be based on empiricism, not on guesswork.
Now, the one funny thing here is that to overcome what I may call the weak assumption problem (and to make the case for enforcement), the Commission relies on classic Chicago school reasoning (or if you prefer on basic rational incentives theory). The idea is as follows: an originator cannot rationally be paying a generic firm to stay out of the market if its patent is valid. The sole rational explanation is that the patent is invalid.
This line of reasoning has some teeth in conventional EU competition law. The AKZO “sacrifice test” in predation cases is one example of this: a dominant firm cannot be rationally pricing below costs. The sole rational explanation is that it is seeking to predate.
I believe, however, that one should err on the side of caution when it comes to crafting such “rules of inference”. Indeed, inferential equations of the AKZO kind are not mundane in EU competition law. They are exceptional, based on rich doctrinal debate as the AKZO ruling shows (it transposes the AREEDA and TURNER test) and on years of judicial precedents. Moreover, the problem is that there are many other possible explanations to the originator payment (irrationality, aversion to risk, etc.), including a whole raft of behavioral economics reasons.
So for patent settlement cases, I would actually apply a different type of “rule of inference”, such as the one applied in Woodpulp or CISAC, whereby the Commission can only find infringement if it proves the conduct has no other purpose than the restriction of competition, and thus must dispel all alternative explanations.
Funnily enough, most of the discussion on patent settlements has not touched upon this issue, and has instead focused on the “object-effect” distinction. This debate is, however, an uneasy one, given the lax state of the case-law. Maybe discussing about patent settlements under a “rules of inference” angle could help reach new ground.
Leave of absence
The question that I get the most often from readers of Chillin’Competition relates to how I manage to reconcile an already quite time consuming job –and a few adjacent academic and business activities – with blog writing (other typical questions being: why don’t you change your pic on the blog? why don’t you use a fake pic of a better looking dude? do you really not make any money out of the blog? (that has a follow up: are you dumb?); why are you not at a fancy firm with a sequence of anglo-saxon names? how does your firm let you write a blog? are you and Nico lovers, friends, do you hate each other?; are you two the same person?)
I generally have a decently good -if long- response to that, and the fact is that I’ve -generally- managed to find the time to juggle everything.
However, I recently whined justified myself wrote about not being able to find the time needed to write something worth your reading time, and commited to make a greater effort. However, in spite of my good intentions, I will not be able to honor my commitment (including the one about writing down my detailed views on Google’s commitments).
I will be taking a short leave of absence until 30 May. In a way it’s a pity, because there’s most interesting stuff going on on which to comment, but work these daysis as interesting as it is absorbing. As it is becoming customary, Pablo Ibáñez (LSE) will be covering my absence.
P.S. On Google’s proposed commitments, and in a nutshell, I would argue that the Commission’s strong hand play has yielded very good results for the Institution. Whereas I retain my doubts about the underlying and arguably unknown theories of harm, it’s hard to deny that the Commission has managed to extract very significant concessions from Google that should make its competitors’ lives easier.
Chillin'Competition 